Gold Tests Support At $1975 As Demand For Safe-Haven Assets Declines

Key Insights

• Hopes for progress in Russia – Ukraine negotiations put pressure on gold. 
• Rising Treasury yields serve as an additional bearish catalyst for precious metals. 
• A move below the support at $1975 will push gold towards the next support level at $1950.

Gold Is Moving Lower At The Start Of The Week

Gold continues its attempts to settle below the support level at $1975 as markets hope that the new round of negotiations between Russia and Ukraine will bring positive results. Both sides have indicated that progress is possible, which is bearish for the safe-haven gold.

There is another reason for concern for gold bulls as Treasury yields have returned to yearly highs. The recent developments in commodity markets will boost inflation, so traders sell U.S. government bonds in anticipation of aggressive moves from the Fed.

The Fed will release its Interest Rate Decision and economic projections on Wednesday, and analysts expect that the interest rate will be increased from 0.25% to 0.5%. It should be noted that Fed’s economic projections will likely have a material impact on markets.

At this point, it is not clear whether the Fed will choose to highlight the risks of inflation at a time when the markets are suffering from geopolitical uncertainty. If the Fed is somewhat dovish, gold will get more support.

Technical Analysis

Gold is testing the support level at $1975. In case gold manages to settle below this support level, it will gain additional downside momentum and move towards the next support, which is located at $1950.

A move below the support at $1950 will push gold towards the next support at the 20 EMA near $1940. If gold manages to settle below this level, it will head towards the support at $1915. A successful test of the support at $1915 will open the way to the test of the support at $1900.

On the upside, gold needs to stay above the $1975 level to have a chance to gain upside momentum in the near term. The next resistance level for gold is located at $2000.

If gold settles above the $2000 level, it will move towards the next resistance at $2020. A successful test of this level will open the way to the test of the resistance at $2050.

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